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Monday, September 17, 2012

FDI multi brand retail in India what will it bring

The government of India has come out with sharp thought out economic
initiatives, and in fact, it has all the makings of a jolt, at least to the
opposition. The opposition seems to have not taken very well of the new
government plans to allow 51% FDI multi brand Retail in India. There is a huge
hue and cry over the decision, and even those who don’t know anything about it
has joined the bandwagon of those opposing it.

Some say that the Indian Prime Minister, Dr. Manmohan Singh has
taken a brave decision, and had similarities of the financial decision he took
in the year 1991, when India surged ahead and stamped its arrival in the world
economic scene. 1991 paved India through to the liberalization road. But will
the increase of FDI in Retail and other sectors bring the same results for the
battered Indian economy.

Finally, broadcasting sector also stands to gain
74% through foreign direct investment. However, news channels and FM Radio has
been exempted from foreign direct investment increase, and the cap stays at 26%.

What has made the
government come out with such a brave step?

Politically, there could be any reason to guess, but India
definitely had its back to the wall, in serious economic terms. Look at the
fiscal deficit which has cramped the Indian economy ride, and with foreign
investors not ready to plunge in the existing environment, there was needed a
decision that will help – and the government has done exactly that with the
announcing of 51% FDI Multi Brand Retail in India. Some say that the government
should have gone with this decision much earlier. John Chalmer, Bureau Chief,
Reuters, has welcomed the big move, saying that India needed this move; the
inflow from the foreign investors will definitely help Indian economy growth.

What are the benefits
expected out of FDI Multi Brand Retail in India

Consumers will definitely stand to gain. You can
expect to buy everything under the same roof, and that means apart from the
convenience, the consumer will get quality stuff, and the shopping experience
will even be more organised. Large retail outlets such as Wal-Mart have the
capability to surprise everyone with the price they offer.

Best Price, the collaboration of
Wal-Mart with Airtel, has 5 retail outlets in the state of Punjab, the quality
and the price that you get in such stores will attract you to pay more visits.

The one major benefit here is the price, not just
on the premises of big retail outlets, but even the smaller business retail
outlets will be forced to keep the prices competitive in order to retain
customers.

The other big advantage that everyone is talking
about is the benefits it will offer to the farmers. The farmers in India
definitely face loss due to wastage of their produce, but with foreign direct
investment of 51% cap, the farmers can expect multi nationals to take charge of
the produce and offer more protection.

In the economic front, foreign reserves opening
up, can be a big boost for the Indian economy, the fiscal deficit will
decrease, the debts accumulated over the years will definitely clear up. Foreign
investors who are sitting with billions and trillions of cash has no where to
invest, the American or the European market seems to be at dead ends, and
therefore, with the cap at 51% foreign direct investment in multi brand retail,
foreign investors will be jumping with all they have in their kitty to make the
most of the opportunity.

Conclusion

However, the major downside in the whole debate is the small
traders. Will they suffer or will they not? Some traders point out that with
stiff pricing of the products in the big malls, they stand to lose, because
they will have to keep up with the prices, which is never easy while some say,
they don’t think things will change much. Only time will tell how the decision
will reflect in the future.

You got to ask the small traders. Believe me you will have your day. Just joking - Personally speaking, I don't think there should be any problem. May be small traders would face a slight drop in sales, but overall, FDI multi brand retail in India is good.

I don't think Sonia Gandhi has to do with anything here. It's time we should start giving credit to the Prime minister for bringing new norms. Don't forget it was Dr. Manmohan Singh who brought sweeping financial changes in 1991.